BHP resumes Gulf of Mexico drilling

BHP Billiton
has resumed deep-water drilling at one Shenzi production well in the Gulf of Mexico but the mining giant has pointed to continued delays to several other significant wells in the region following last year’s moratorium in the wake of the Deepwater Horizon drill-rig disaster.

BHP was the first to resume drilling of a deep-water production well in the Gulf under the new regulations in the US, the company’s petroleum chief Michael Yeager said in a presentation to the Howard Weil energy conference in New Orleans on Tuesday. It had earlier resumed drilling at a water injector well at the field, which was also a first under the new rules, according to the presentation.

But other wells continue to be delayed, contributing to a forecast 12 million barrels of oil equivalent (boe) reduction in BHP’s expected oil and gas production for the full year. Output had originally been expected to gain from the record 159 million boe in 2009-2010, but is now expected to be roughly flat. BHP’s $US4.75 billion purchase of Chesapeake Energy’s Fayetteville shale gas assets, due to complete shortly, will however make up part of the shortfall.

Two wells at Shenzi remain deferred, as do six wells at the large Atlantis project in the Gulf,w here no new production wells are expected to be drilled until the December half this year, pending approvals, BHP said. Two wells are also deferred at Neptune, including the Northeast appraisal well, and a permit is being sought for a “very significant" appraisal well at the northern part of the Mad Dog field, it added.

Mr Yeager still pointed to a return to volume growth in the 2012 financial year, and forecast a 6 per cent compound annual growth rate for production from 2007 to 2021, reaching about 700,000 boe per day by the end of that period.

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The presentation also pointed to a increase in spending on petroleum exploration to about $US1 billion a year, up from a forecast $US900 million in 2010-11 and $US817 million the previous year. Major initiatives involve the resumption of drilling in the South China Sea, the deepest-ever well in Malaysia and seismic and/or drilling in Australia, Colombia, India, South Africa, Brunei and Vietnam.

BHP earlier this week signed contracts for two drill-rigs for exploration programs offshore Vietnam and Trinidad and also, together with BG Group, picked up a deep-water block in the Mumbai Basin in India’s latest licensing round.